FAR LIMITED — Interim / Quarterly Report 2014

Sep 11, 2014

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ABN 41 009 117 293
30 June 2014
Financial Report
for the Half-Year Ended 30 June 2014
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Half-Year Financial Report 2014

Contents

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Directors’ Report	2
Auditor’s Independence Declaration	5
Independent Auditor’s Report	6
Directors’ Declaration	8
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income	9
Condensed Consolidated Statement of Financial Position	10
Condensed Consolidated Statement of Changes in Equity	11
Condensed Consolidated Statement of Cash Flows	12
Notes to the Financial Statements	13

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Half-Year Financial Report 2014

Directors’ Report

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The directors of FAR Limited submit herewith the Financial Report of FAR Ltd and its subsidiaries (“the Consolidated Entity”) for the half-year ended 30 June 2014. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The directors of the Company in office during or since the end of the period are:

Mr N J Limb Ms C M Norman Mr A E Brindal Mr C L Cavness Mr B J M Clube

All directors held office during and since the end of the period unless otherwise stated.

PRINCIPAL ACTIVITIES

The principal activities of the Company are:

• Securing exploration projects;

• Conducting exploration for oil and gas deposits; and

• Monetisation of oil exploration and production interests

OPERATING RESULTS

The loss for the half year ended 30 June 2014 was $4,084,414 (half-year ended 30 June 2013: $3,627,636). Included in the loss for the period is exploration expenditure of $2,831,323 (2013: $2,014,365), with $1,418,588 of Senegal costs.

FINANCIAL POSITION

The statement of financial position at 30 June 2014 comprised net assets of $33,673,963 (31 December 2013: $30,231,290), made up of:

• cash of $42,699,690 (31 December 2013: $24,203,117)

• oil and gas properties of $1,683,340 (31 December 2013: $2,209,140)

• Trade and other payables of $9,550,724 (31 December 2013: $2,219,807) includes Senegal joint venture payables of $8,858,006.

• Funds received in advance of $1,474,803 (31 December 2013: $nil), represents the balance of Senegal farm-out proceeds received to fund the Senegal Fan-1 well.

• other assets and liabilities netting to an asset of $316,460 (31 December 2013: net asset of $6,038,840)

CASH FLOW

Cash and cash equivalents increased by $19,316,851 during the half-year ended 30 June 2014. The significant movements during the period were as follows:

• Proceeds from farm-out of oil and gas properties of $7,315,660

• Farm-out proceeds to fund Senegal well costs of $9,572,520

• Proceeds from issue of shares of $8,000,000

• Payments to suppliers and exploration and evaluation expensed of $4,828,779

• other net cash outflows (including effects of exchange rate movement on cash balances) of $1,562,818.

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Half-Year Financial Report 2014

Directors’ Report

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REVIEW OF OPERATIONS

Senegal

The Company executed two farm-in agreements in the prior year in respect of its permits offshore Senegal for the drilling of two offshore wells. The first agreement was with Cairn Energy PLC (‘Cairn') and the second with ConocoPhillips (‘Conoco’).

Cairn will fund the Company through the drilling and testing of a “shelf play” exploration well up to an investment cap of US$80 million and pay back costs totalling approximately US$10 million. All back cost payments have been received by the Company. Cairn became Operator of the blocks in August 2013 following Government approval of the farm-in agreement.

Pursuant to the terms of the Conoco farm in agreement Conoco is to provide funding which is equivalent to a carry through a second exploration well to a maximum of US$116 million. Conoco will provide the funding to the Company via a combination of cash payments and well cost carry payments. All cash payments to the Company have now been completed by ConocoPhillips (totalling US10.4 million). Following both farm-in agreements the Company retains a 15% carried interest up to an investment cap of US$190m in the Senegalese permits.

On 17 April 2014, the Operator commenced drilling the first of the two wells FAN-1. The FAN-1 drilling operations were suspended on 19 June 2014 by the necessity to undertake unscheduled rig maintenance. On 28 July 2014 drilling had recommenced and at the date of this report the well has not been completed to total depth. The unscheduled rig maintenance has resulted in a revision to the estimated cost of the two wells and the Company estimates that it could be required to contribute approximately $24.2 million (US$22.5 million) to fund its share of the drilling program (reference ASX release 30 June 2014).

Kenya L9

FAR is of the view that that the Miocene carbonate reef play, identified in Block L6 extends along the Kenyan coast and into Block L9 and that a future 3D seismic survey over the inboard part of Block L9 would evaluate this potential. The assignment agreement between Petrole Investments a fully owned subsidiary of FAR Ltd (“FAR”) and Dominion Petroleum (Kenya), Ltd a fully owned subsidiary of Ophir Energy PLC (“Ophir”) executed on 26 July 2013 in relation to an assignment of a 30% interest in Block L9 offshore Kenya, expired on 30 June 2014. Following this the Company has been in discussions with Dominion Petroleum Kenya Limited regarding the Company’s entry into the block and the plans for future work program in Block L9. FAR’s subsidiary, Flow Energy Ltd, was a member of the bidding consortium that made an application bid for Block L9 in 2010. Following negotiations with the Ministry of Energy and Petroleum, a heads of agreement was signed and Block L9 was subsequently awarded in May 2011.

Kenya L6

In February 2014, the Group signed a farm-out to Milio E&P Limited and Milio International Limited of Dubai in relation to the onshore part of Block L6, Kenya. Under the terms of the farm-out deal, the Group will be fully carried through the drilling of an onshore exploration well in 2015 and the acquisition, processing and interpretation of a regional 1,000 line kilometre 2D seismic survey. The Group will hold 24% in the onshore area and retains its full 60% interest in the offshore part of Block L6. The Group will remain Operator of the entire Block L6 under the Production Sharing Agreement with the Government of Kenya.

In events post the half year end, the L6 joint venture has been awarded a one year extension to the current PSC term by the Government of Kenya due to the inability to access the ground to complete planned seismic operations because of security incidents in the country. At the reporting date the conditions precedent of the farm out agreement had not been completed and the parties were negotiating an amendment to the farm-out agreement in light of the implications of the security incidents.

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Half-Year Financial Report 2014

Directors’ Report

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Guinea-Bissau

In February 2014, the Company completed an assessment of the Contingent and Prospective Resources for its GuineaBissau permits. Prospective Resources were assessed to be 950 million barrels of oil (unrisked best estimate, 100% basis), 140 million barrels net to the Company. (Reference ASX release 5/2/2014).

The Company and its Joint Venture partner Svenska Petroleum Exploration AB have been monitoring the political situation in Guinea Bissau following the Presidential elections in May. The Joint Venture delayed the execution of a rig contract until after the elections and at this date does not have a rig under contract for the planned drilling. As a result, the Joint Venture has amended the current work program for the remainder of 2014 to remove the one appraisal well and one contingent exploration well previously planned. It is anticipated that these wells will be now drilled in 2015. The Company continues to monitor the political situation in Guinea-Bissau very closely and is in discussions with the Operator on the Joint Venture’s future plans and expenditures in light of potential developments in country.

Western Australia

In March 2014, the Group completed an assessment of the prospective resources for its Western Australian blocks WA-457-P and WA-458-P. The Group estimated the Prospective Resources were assessed to be approximately 450 million* barrels oil equivalent (unrisked best estimates, 100% and net to the Group basis) (reference ASX release 11/3/2014).

The Group progressed with planning activities in relation to a 3D seismic acquisition program over its Western Australian blocks WA-457-P and WA-458-P that it intends to undertake during 2014.

Subsequent Events after balance sheet date

On 28 July 2014 the Company announced the resumption of drilling on the FAN-1 well offshore Senegal which had been suspended since 19 June 2014.

The Directors are not aware of any other matters or circumstances at the date of this report, other than those referred to in this report, that have significantly affected or may significantly affect the operations, the results of the operations or the state of affairs of the Consolidated Entity in subsequent financial years.

AUDITOR’S INDEPENDENCE DECLARATION

In order to comply with Section 306 (2) of the Corporations Act 2001, the directors’ report includes the auditor’s independence declaration on page 5 of the half year financial report.

Signed in accordance with a resolution of the directors made pursuant to Section 306(3) of the Corporations Act 2001.

On behalf of the Directors

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Mr N J Limb Chairman Melbourne, 12 September 2014

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The Board of Directors FAR Ltd Level 17, 530 Collins Street Melbourne VIC 3000

12 September 2014

Dear Board Members

FAR Ltd

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of FAR Ltd.

As lead audit partner for the review of the financial statements of FAR Ltd for the half-year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

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DELOITTE TOUCHE TOHMATSU

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Ian Sanders Partner Chartered Accountant

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

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Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia

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DX 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au

Independent Auditor’s Review Report to the members of FAR Ltd

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of FAR Ltd, which comprises the condensed consolidated statement of financial position as at 30 June 2014, and the condensed consolidated statement of profit or loss and other comprehensive income statement, the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 8 to 19.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and its performance for the halfyear ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of FAR Ltd, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

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Auditor’s Independence Declaration

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of FAR Ltd, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of FAR Ltd is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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DELOITTE TOUCHE TOHMATSU

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Ian Sanders Partner Chartered Accountants Melbourne, 12 September 2014

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Half-Year Financial Report 2014

Directors’ Declaration

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The directors declare that:

• (a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

• (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the financial position as at 30 June 2014 and of the performance of the Consolidated Entity for the half-year ended on that date.

Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001.

On behalf of the Directors

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Mr N J Limb Chairman Melbourne, 12 September 2014

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Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Half-Year Ended 30 June 2014

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Note Continuing operations Revenue 3 Other income 4 Depreciation and amortisation expense Exploration expense 5 Finance costs Administration expenses Employee benefits expense 5 Consulting expense Foreign exchange (loss)/gain Other expenses Loss before income tax Income tax expense Loss for the period from continuing operations Discontinued operations Profit from discontinued operations Loss for the period Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive loss for the period Earnings per share: From continuing and discontinued operations Basic loss (cents per share) Diluted loss (cents per share) From continuing operations Basic loss(cents per share) Diluted loss(cents per share)	Half-year ended 30 Jun 2014 AU$ 30 Jun 2013 AU$ 233,278 346,354 688,622 308,435 (27,110) (44,543) (2,831,323) (2,014,365) (368) - (375,227) (215,374) (524,462) (1,368,199) (296,989) (340,245) (779,062) 297,099 (171,773) (596,798)
	(4,084,414) (3,627,636) - -
	(4,084,414) (3,627,636)
	- -
	(4,084,414) (3,627,636)
	(8,568) (27,933)
	(4,092,982) (3,655,569)
	(0.16) (0.15) (0.16) (0.15) (0.16) (0.15) (0.16) (0.15)

Notes to the financial statements are included on pages 13 to 19

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Condensed Consolidated Statement of Financial Position As at 30 June 2014

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Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 7 Inventories Other financial assets Other Total Current Assets NON CURRENT ASSETS Property, plant and equipment Oil and gas properties 8 Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 9 Funds received in advance 10 Provisions Total Current Liabilities NON-CURRENT LIABILITIES Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital 11 Reserves Accumulated losses TOTAL EQUITY	30 Jun 2014 31 Dec 2013 AU$ AU$ 42,699,690 24,203,117 312,646 5,966,201 77,166 81,236 85,664 87,683 55,407 93,839
	43,230,573 30,432,076
	165,919 148,242 1,683,340 2,209,140
	1,849,259 2,357,382
	45,079,832 32,789,458
	9,550,724 2,219,807 1,474,803 - 351,807 292,427
	11,377,334 2,512,234
	28,535 45,934
	28,535 45,934
	11,405,869 2,558,168
	33,673,963 30,231,290
	150,920,243 143,384,588 4,853,089 4,861,657 (122,099,369) (118,014,955)
	33,673,963 30,231,290

Notes to the financial statements are included on pages 13 to 19

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Condensed Consolidated Statement of Changes in Equity For the Half-Year Ended 30 June 2014

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Balance at 1 January 2013 Loss for the period Exchange differences arising on translation of foreign operations Total comprehensive income for the period Issue of options Balance at 30 June 2013 Balance at 1 January 2014 Loss for the period Exchange differences arising on translation of foreign operations Total comprehensive income for the period Issue of shares Share issue costs Balance at 30 June 2014	Reserves Share Capital Option reserve Equity component on convertible notes Foreign currency translation reserve Total Accumulated losses Total attributed to equity holders of parent AU$ AU$ AU$ AU$ AU$ AU$ AU$ 143,384,588 3,852,555 671,496 (635,362) 3,888,689 (110,172,214) 37,101,063 - - - - - (3,627,636) (3,627,636) - - - (27,933) (27,933) - (27,933)
	- - - (27,933) (27,933) (3,627,636) (3,655,569)
	- 992,000 - - 992,000 - 992,000
	143,384,588 4,844,555 671,496 (663,295) 4,852,756 (113,799,850) 34,437,494
	143,384,588 4,844,555 671,496 (654,394) 4,861,657 (118,014,955) 30,231,290 - - - - - (4,084,414) (4,084,414) - - - (8,568) (8,568) - (8,568)
	- - - (8,568) (8,568) (4,084,414) (4,092,982)
	8,000,000 - - - - - 8,000,000 (464,345) - - - - - (464,345)
	150,920,243 4,844,555 671,496 (662,962) 4,853,089 (122,099,369) 33,673,963

Notes to the financial statements are included on pages 13 to 19

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Condensed Consolidated Statement of Cash Flows for the Half-Year Ended 30 June 2014

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Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers Payments for exploration and evaluation expensed Interest and other costs of finance paid Net cash (used in)/provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Payments for oil and gas properties capitalised Proceeds from farm-out of oil and gas properties Payments for property, plant and equipment Farm-out proceeds funding well costs Advanced to Joint Venture Reclassification of performance bond to cash Proceeds from security deposits Net cash outflow on acquisition of a business Net cash (used in)/provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Payment for share issue costs Net cash (used in)/provided by financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial period	Half-year ended 30 Jun 2014 AU$ 30 Jun 2013 AU$ - 13,513 (1,321,883) (1,297,578) (3,506,896) (2,995,482) (368) (169)
	(4,829,147) (4,279,716)
	260,662 389,825 (513,554) (165,686) 7,315,660 436,825 (44,787) (6,114) 9,572,520 - (21,205) (624,617) - 5,400,000 1,953 43,653 - (14,270)
	16,571,249 5,459,616
	8,000,000 - (425,251) -
	7,574,749 -
	19,316,851 1,179,900 24,203,117 17,350,678 (820,278) 74,066
	42,699,690 18,604,644

Notes to the financial statements are included on pages 13 to 19

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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1. Significant Accounting Policies

a. Statement of compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and Accounting Standard AASB 134 Interim Financial Reporting . Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year financial report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.

b. Basis of preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost except, where applicable, for the revaluation of certain non-current assets and financial instruments. All amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s annual financial report for the year ended 31 December 2013.

c. Going concern

The Directors believe that it is appropriate to prepare the consolidated financial statements on a going concern basis. As at 30 June 2014, the Group’s current assets exceeded current liabilities by $31,853,239 and the Group has cash and cash equivalents of $42,699,690. Of this cash amount, based on latest estimates received from the Operator, approximately $28 million will be incurred in funding FAR’s share of costs in relation to the two well offshore Senegal drilling operation. At the reporting date, the drilling program is ongoing and therefore FAR’s eventual funding requirement for the two well operation is uncertain and dependent on future drilling performance and is subject to the operational, subsurface and commercial risks associated with frontier deep water drilling. The Company expects that in the event of success in either well, FAR’s funding requirement will increase because it is expected that additional well operations will be undertaken by the Joint Venture.

The Group will continue to manage its evaluation and operating activities to ensure that it has sufficient cash reserves for the next twelve months. The Group will likely require funding within the next twelve months to fund a number of activities that potentially include: its entry into projects and activities in Kenya, seismic on the Australian blocks WA457-P and WA-458-P, drilling in Guinea-Bissau and any new venture opportunities the Company may acquire.. For further details of future commitments refer to Note 12. In the opinion of the Directors, the Group will be in a position to continue to meet its minimum expenditure for at least twelve months from the date of this report, and that the Company has adequate plans in place in order that funding requirements in the foreseeable future can be met. This basis has been determined after consideration of the following factors:

• The ability to issue share capital under the Corporations Act 2001, if required, by a share purchase plan, share placement or rights issue

• The option of farming out all or part of the Group’s assets

• The option of selling interests in assets: and

• The option of relinquishing or disposing of rights and interests in certain assets.

The Directors are satisfied that the Company will be able to realise its assets and discharge its liabilities in the normal course of business. Uncertainty exists as to the result of the Group’s exploration activities, access to funds and the realisation of the current value of its assets. Consequently the Directors regularly assess the Company’s and the Group’s status as a going concern and its changing risk profile as circumstances change.

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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2. Segment Information

AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the entity that are regularly reviewed by the Managing Director (chief operating decision maker) in order to allocate resources to the segments and to assess its performance.

The consolidated entity undertakes exploration of oil and gas in Australia and Africa. The identification of the Consolidated Entity’s reporting segments remains consistent with prior periods, with management allocating resources to segments on a geographical basis with the inclusion of a ‘corporate’ segment which captures all head office and administrative income, expenses and assets.

Information regarding these segments is presented below. The accounting policies of the reportable segments are the same as those of the Consolidated Entity.

Segment Assets and Liabilities

The following is an analysis of the Consolidated Entity’s assets and liabilities by reportable operating segment:

AGC Guinea Bissau Kenya Senegal USA Corporate Total assets and liabilities Assets and liabilities relating to North American discontinued operations Total assets and liabilities	Assets Liabilities 30 Jun 2014 31 Dec 2013 30 Jun 2014 31 Dec 2013 AU$ AU$ AU$ AU$ 91,256 121,290 19,073 49,603 1,523,893 1,163,169 77,350 342,642 606,819 955,570 137,344 245,747 120,283 1,054,360 10,350,224 1,153,396 88,750 11,875 - 3,002 42,648,831 29,379,194 821,878 763,778
	45,079,832 32,789,458 11,405,869 2,558,168 - - - -
	45,079,832 32,789,458 11,405,869 2,558,168

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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Segment Revenue and Results

The following is an analysis of the Consolidated Entity’s revenue and results by reportable segment for the period under review:

AGC Australia Guinea Bissau Jamaica Kenya Senegal USA Other exploration Corporate Consolidated segment revenue and loss before tax for the period from continuing operations Income tax expense Consolidated segment loss after tax for the period from continuing operations	Revenue 30 Jun 2014 30 Jun 2013 AU$ AU$ - - - - - - - - - - - - - 209 - - 233,278 346,145	Segment Loss/(loss) 30 Jun 2014 30 Jun 2013 AU$ AU$ (95,826) (13,441) (331,277) (226,336) (365,610) (383,220) - (3,610) (441,181) (705,655) (1,418,588) (649,190) (18,457) 51,741 (178,841) (32,912) (1,234,634) (1,665,013)
	233,278 346,354 - -	(4,084,414) (3,627,636) - -
		(4,084,414) (3,627,636)

The revenue reported above represents revenue generated from external customers. There were no intersegment sales during the year.

3. Revenue

An analysis of the Consolidated Entity’s revenue for the year from continuing operations is as follows:

Interest Revenue: Bank deposits 4. Other income Miscellaneous other income Gain on recovery of back costs Gain on sale of oil and gas properties	Half-year ended 30 Jun 2014 AU$ 30 Jun 2013 AU$ 233,278 346,354
	233,278 346,354
	Half-year ended 30 Jun 2014 AU$ 30 Jun 2013 AU$ - 155,540 688,622 - - 152,895
	688,622 308,435

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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5. Profit/(loss) for the period

Loss for the period from continuing operations includes the following expenses:

Exploration expense AGC Australia Guinea-Bissau Senegal Kenya Other Employee benefit expense: - Short-term employee benefits – salaries and fees - Recharge of salaries and fees to exploration expense Post-employment benefits - Defined contribution plans - Share based payments - equity settled - Increase in employee benefits provisions	Half-year ended 30 Jun 2014 AU$ 30 Jun 2013 AU$ (95,825) (13,441) (331,277) (226,336) (365,610) (383,220) (1,418,588) (649,191) (441,181) (705,656) (178,842) (36,522)
	(2,831,323) (2,014,365)
	(859,713) (822,544) 434,246 384,806 (57,014) (52,489) - (816,000) (41,981) (61,972)
	(524,462) (1,368,199)

6. Cash

Cash and cash equivalents Deposits at call Term deposits	30 Jun 2014 AU$ 31 Dec 2013 AU$ 21,829,565 9,523,503 7,270,125 279,614 13,600,000 14,400,000
	42,699,690 24,203,117

7. Trade and other receivables

Current Interest receivable Amount receivable – recovery of back costs Other receivables Less allowance for doubtful debts	30 Jun 2014 AU$ 31 Dec 2013 AU$ 7,706 35,555 - 5,587,841 304,940 622,197 - (279,392)
	312,646 5,966,201

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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8. Oil and gas properties

Opening balance Additions Recovery of back costs Net foreign currency exchange differences Closing balance	30 Jun 2014 AU$ 31 Dec 2013 AU$ 2,209,140 12,112,665 607,950 970,791 (1,029,814) (10,957,118) (103,936) 82,802
	1,683,340 2,209,140

9. Trade and other payables

Current Trade payables Other payables (i)	30 Jun 2014 AU$ 31 Dec 2013 AU$ 449,230 107,377 9,101,494 2,112,430
	9,550,724 2,219,807

(i) Includes Senegal joint venture payables of $8,858,006.

10. Funds received in advance

Current Senegal farm-out proceeds received to fund well costs	30 Jun 2014 AU$ 31 Dec 2013 AU$ 1,474,803 -
	1,474,803 -

Proceeds of $9,572,520 (US$ 8,890,000) were received on 30 April 2014 in accordance with the ConocoPhillips Farm-in Agreement in respect of the Senegal project. The proceeds received represent a Carry Assignment Fee for the purpose of funding the Senegal FAN-1 well costs. These funds are offset against future FAN-1 drilling costs capitalised to Oil and Gas Properties. Drilling costs in excess of the farm-out proceeds will remain capitalised in Oil and Gas Properties, Note 8.

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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11. Issued capital

Paid up capital Ordinary fully paid shares at beginning of the period/year Shares allotted during the period/year Share issue costs Transfer from equity component on convertible notes reserve Ordinary fully paid shares at end of the period/year	30 Jun 2014 30 Jun 2014 31 Dec 2013 31 Dec 2013 Number AU$ Number AU$ 2,499,846,742 143,384,588 2,499,846,742 143,384,588 200,000,000 8,000,000 - - - (464,345) - - - - - -
	2,699,846,742 150,920,243 2,499,846,742 143,384,588

On 10 June 2014, the Company issued 200,000,000 ordinary shares at 4.0 cents per share as part of a placement to fund further exploration in offshore Kenya.

12. Commitments

In order to maintain rights to tenure of exploration permits, the Group is required to perform minimum exploration work programs specified by various state and national governments. These obligations are subject to renegotiation when application for an extension permit is made and at other times. The minimum exploration work program commitments may be reduced by entering into sale or farm-out agreements or by relinquishing permit interests. Should the minimum exploration work program not be completed in full or in part in respect of a permit then the Group’s interest in that exploration permit could be either reduced or forfeited. In some instances a financial penalty may result if the minimum work program is not completed. The approved expenditure on exploration permits may be in excess of the minimum exploration expenditure. Where the Group is committed to approved joint venture exploration expenditure greater than the minimum permit exploration work program commitments those amounts are included.

The current estimated expenditure for these minimum exploration work program commitments are as follows:

Oil and gas properties Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years	30 Jun 2014 AU$ 31 Dec 2013 AU$ 35,466,027 32,495,983 - - - -
	35,466,027 32,495,983

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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13. Contingent liabilities

Contingent liabilities Guinea-Bissau – contingent payment from future production Guinea-Bissau – contingent withholding tax liability Kenya L6 – performance Bond Kenya L9 – past costs (i)	30 Jun 2014 AU$ 31 Dec 2013 AU$ 13,800,425 14,528,386 602,772 627,952 84,900 84,900 - 12,860,858
	14,488,097 28,102,096

(i) The Transfer Agreement governing the transfer of the Company’s 30% interest in the Kenya L9 block expired on 30 June 2014. Accordingly all obligations under the Agreement have expired.

In addition to the above, the Kenya L6 joint venture (the Group has a 60% paying interest) is currently working with the Kenyan Revenue Authority to resolve a potential tax liability on the Milio farm-out deal. The amount of the liability has not yet been determined.

14. Subsequent events

On 28 July 2014 the Company announced the resumption of drilling on the FAN-1 well offshore Senegal which had been suspended since 19 June 2014.

The Directors are not aware of any other matters or circumstances at the date of this report, other than those referred to in this report, that have significantly affected or may significantly affect the operations, the results of the operations or the state of affairs of the Consolidated Entity in subsequent financial years.

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Notes to the Financial Statements For the Half-Year Ended 30 June 2014

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